Enter the sponsor’s overhead rate and the direct costs into the calculator to determine the indirect costs.

## Indirect Costs Formula

The following formula is used to calculate the indirect costs of a budget preparation

IC = SOR/100 * DC

• Where IC is the indirect costs (\$)
• DC is the direct cost base (\$)

## Indirect Costs Definition

Indirect costs are defined as project-related costs that cannot easily be identified for a particular project. In other words, these are the overhead costs of a project.

## How to calculate indirect costs?

Example Problem #1:

Next, determine the direct cost base. The direct cost base of this planned project is budgeted to be \$100,000.00.

Finally, calculate the indirect costs using the formula above:

IC = SOR/100 * DC

= 50/100 * \$100,000.00

= \$50,000.00.

Example Problem #2:

In this next example, the sponsor’s overhead rate is much higher, at 87% of direct costs.

The direct costs of this project are also higher at \$200,000.00.

Using the formula as we did above, the indirect costs are calculated as :

IC = SOR/100 * DC

= 87/100*200,000

= \$174,000.00.